A small group of Israelis and Palestinians, including senior and retired security officials, academics and political activists, were invited by IPCRI, the Israel Palestinian Center for Research and Information, to discuss the status of the two states for two peoples idea following Hamas' victory in the Palestinian parliamentary elections.

Dr. Riad Malki, the head of the Panorama Research Institute in Ramallah, surveyed the political situation in the territories and presented the new reality materializing there. Without anyone realizing it, the West Bank and Gaza Strip are being transformed into two separate entities.

"Israel's decision not to allow passage of Hamas ministers between Gaza and the West Bank has far-reaching ramifications," Malki pointed out. "The significance is that prime minister designate Ismail Haniyeh and most of his ministers will be Gazans, and the Gaza Strip will be transformed into the Palestinian Authority's main headquarters. The important decisions will be made there and most PA activities will take place there. The government offices, located in Ramallah, will be run by deputy ministers."

Even though PA Chairman Mahmoud Abbas can access both regions - unlike Haniyeh, who is not permitted to enter the West Bank - Fatah is likely to lose what little remaining influence it has in Gaza. In Malki's forecast, when Gaza is transformed into Hamastan, the West Bank will be transformed into Fatahland. Over five years of assassinations and arrests have diluted the Hamas leadership in the West Bank and swung the balance of internal power within the organization in favor of the Gaza Strip. The institution of the presidency is now essentially being transformed into a source of power, a mini-state, a counterweight against the government, says the Palestinian researcher, a man with access to the political corridors of power. Therefore, he is willing to bet that Fatah will not be tempted by Hamas' offer to join its government. At most, a few party activists will join the Haniyeh government under the guise of being "independents."

According to Malki, associates of Abu Mazen are now working on entrenching his status through legislative and practical means, such as command of the security apparatuses and the administrative offices, as well as control of ties with the international community, the Arab world and Israel. Hamas' refusal to recognize the state of Israel will turn Abu Mazen's office into the only address for foreign leaders coming to visit the territories. Every photo of a meeting between Abu Mazen and a foreign dignitary will further highlight Haniyeh's isolation.

Arafat is laughing in his grave

Malki reminds Israelis that the Sharon government was among those pressuring Yasser Arafat to institute a mixed political system - presidential and parliamentary.

"The office of prime minister was an addition that was made solely in order to alter the balance of power and weaken Arafat's power," Malki explained. Now Arafat can laugh in his grave at the distress of those who did not want him and instead got the heirs of Ahmed Yassin, another deceased person who can roar with laughter.

"At that time," noted Malki, "the president and the prime minister were members of the same party and the transfer of authorities from one side to the other was all in the family. No one ever imagined that Hamas would run in the elections for the legislative council, not to mention the elections for the post of prime minister.

"The political system and the basic laws are having a hard time dealing with the new situation of a two-headed administration," added Malki. "The laws passed dealt only with the transition period after Oslo and did not consider the long term. The result is that there are no laws that can provide legislative support for the division of powers. The basic law was written for the president, and the prime minister's authority evolved afterward and derived its power from that. In effect, the president is the one who bears supreme responsibility and is the most significant figure."

Malki says Hamas' internal campaign focuses on the authorities and responsibilities of the parliament and the government, as if the institution of president did not exist and its powers were of no value.

"They built on the fact that Abu Mazen would not utilize these powers to fight against them, but he surprised them and showed that he won't hesitate to use them. They also understood that Abu Mazen is their safety net against the world and that they need him like air to breathe. That is why Hamas changed its tactics and is trying to neutralize Abu Mazen by making flattering declarations and showing some respect for the man. This is a very clever group. They know that in our culture, a bear hug is an acceptable means for reducing the danger of your rival. Abu Mazen never dreamed that his position would be so strong. Who knows, perhaps this new situation is affecting his quiet nature and extracting from him leadership qualities."

The comments made by Malki, who for years was a key member of the Popular Front, did not reveal any tinge of regret. He even noted that on the eve of the elections, when Abu Mazen sought to take some preventive action in advance of the impending blow from Hamas, Fatah leaders thwarted his proposal to introduce amendments to the constitution that would enable him to appoint a vice president, another counterweight to the prime minister, and enact an emergency law authorizing him in special cases to cancel the elections and announce new elections.

Wanted Netanyahu, got Olmert

A short time after his return to the Labor party, Amir Peretz met with Avraham (Beiga) Shochat, an old acquaintance.

"Don't scare away our voters," Shochat pleaded. From the office of finance minister, Shochat saw quite a few things not seen from the office of the Histadrut Labor Federation chairman. One of the most important is that Labor constituents do not sit around idling in cafes in Arad. Shochat suggested searching for his voters in the Ramat Aviv Gimmel mall, among business people, directors general and lawyers. In other words, bring home all the voters who fled to Shinui.

Shochat did not guess how right he was. Who knew then that Kadima, the centrist party of the moment, led by Ehud Olmert, would make Shinui unfashionable, along with his good friend, Yosef (Tommy) Lapid? Who imagined that a certain Levental would knock Avraham Poraz out of the hardly realistic second slot? Who ever imagined that one day an Israeli leader would declare that there is no more democratic institution than his own party's council, and then less than an hour later, when it turned out that the council members did not fulfill his expectations, throw them to the winds?

Peretz listened and continued to hold his own. He removed Shimon Peres from the Labor Party leadership and hoped that Benjamin Netanyahu would do his work for him in the Likud and get rid of Ariel Sharon. Peretz assumed that the middle classes would be more distanced by Netanyahu's difficult nature and political hawkishness than they would be drawn by Netanyahu's economic worldview. When the wealthy are in your pocket, Peretz thought, you can focus your campaign on the poor, talk about the minimum wage, toy with the inheritance and get friendly with Shelly Yachimovich.

The political big bang blew up Peretz's plan and upended the political battlefield. Kadima, led by the "new" Sharon, and afterward by Olmert, who is portrayed in the media as the "new" copy of Sharon, fits the delicate hands of the members of the top decile like a glove. When the bourse recovers so quickly from the prime minister's illness, does anyone even remember that Peres is the one who came up with the term "piggish capitalism" for the social policy of the government - the Sharon government? Who even cares? That is tough for a party in which one of its leaders still holds the title of vice president of the Socialist International (Peres is still a senior member of this important international organization).

The results of the Likud primaries removed any remaining doubt in the Labor Party that Peretz, along with Netanyahu, was a long shot for prime minister. And the Likud has not even scraped the bottom yet. If Netanyahu winks at high society, he can expect trouble from the ideological right, which has not yet recovered from the defeat in the Likud Central Committee. The Labor Party has concluded that every vote that doesn't go to the Likud is another vote for Kadima. Not for Labor. Peretz understood that Shochat was right; he will have to look for the 36 seats Labor and Meretz won in 1999 in the center - in the heart of Ramat Aviv Gimmel, among the constituents of Shinui. He won't find them in Sderot. According to the polls, even under the leadership of the labor leader, the unemployed of the development towns love to hate the Alignment (Labor's precursor).

That is the whole story behind Peretz's zigzag. It is a considerable part of the explanation of Prof. Avishay Braverman's cautious remarks about raising the minimum wage and denials regarding the inheritance tax. In the coming weeks, the Labor Party's socioeconomic messages will move closer to the center. The political positions will also not be too leftist. The day after the primaries, instead of Peretz's proletarian mustache and blue shirt, the public will see a clean-shaven leadership dressed in suits and ties, men and women who look and sound more or less like the men and women of Kadima.

If it is up to Peretz, and it is up to him to a large extent, the party's candidates for top government jobs will be Ami Ayalon (defense), Braverman (finance), Yuli Tamir (education), Isaac Herzog and Ophir Pines-Paz.

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